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Why Total Energies Nigeria stock is undervalued despite a decline in earnings

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Total Energies has consistently delivered solid positive revenue over the years. In the past five years (except for 2019 and 2020), the company recorded a CAGR of 4.3 per cent and 20.17 per cent in revenue and earnings, respectively.

The oil firm recorded a revenue shortfall in 2019 due to supply challenges, owing to the regulated price of PMS at N145 per litre. More so, price distortions in diesel and Jet A1 markets as a result of constant NNPC interventions in these markets, also contributed to the decline in revenue.

In 2020, the firm’s revenue dipped further as a result of the COVID-19. The effect of COVID-19 lockdowns by the Federal Government of Nigeria put businesses on hold and grounded vehicular movement. The meant that the company couldn’t sell enough fuel to earn more revenue.

But in 2022, Total Energies was back to reporting revenue growth. The company recorded N337.188 billion as of Q3 2022, marking a 39.21 per cent increase compared to the revenue recorded during the comparable period in 2021.

In our opinion, “We believe Total Energies will continue to grow its revenue all other things being equal.

“Petroleum products are the major revenue earner for Total Energies. The revenue line contributed over 70 per cent to total revenue between 2018 and 2021. However, with the strides made by the firm’s management to venture into solar energy, the contribution from lubricants and others has continued to increase over time.

“For example, in 2018 lubricants and others contributed only 15.96 per cent while it grew to 25.23 per cent in 2021 and 27.17 per cent in the first nine months of 2022, indicating the need revenue diversification to forestall shocks.

“The positioning of Total Energies in the solar energy space remains highly strategic and a well-thought-out decision that will put them ahead of the pack.

“But the major challenge analysed is the high cost of sales. The Cost of Sales (COS) is the highest cost driver for Total Energies as it gulps well above 80 per cent of its total revenue. Between 2018 and 2021, the firm expanded on average of 86.40 per cent per year of its revenue on the cost of goods sold.

“In the nine months of 2022, the company has expended 88.41 per cent of its revenue on the cost of goods sold, primarily on the back of a 42.3 per cent rise in net changes in inventory of lubes, greases and refined products. Consequently, earnings declined by 6.57 per cent to N12.506 billion in 2022 from N13,386 billion recorded a year ago, while earnings per share declined by 6.59 to N36.83 per share.

“Analysis of Comparable: In 2021, the firm recorded the highest Earnings Per Share which was N49.66 with Conoil coming a distant second at N4.44 which is 11.18x lower that Total Energies.

“In terms of price to earnings (P/E), excluding Ardova and Eterna which recorded losses in FY 2021, Total Energies had the lowest P/E ratio. It had the best profitability ratio when compared with its peers. The firm recorded an 8.08 per cent return on assets while it recorded a 40.52 per cent Return on Equity.

“It had the best dividend yield when compared with its peers. Although Conoil’s dividend payout ratio stood at 56.30 per cent, Total Energies’ dividend payout was 44.70 per cent which signifies a good balance between investor compensation for risk and growth potentials.

“Valuation: Trading at a trailing 12 months price-to-earnings ratio of 4x, below the NG market ratio of 7x, indicates that at the current price, the stock is cheaper for an investor relative to its earnings potential, invariably, pinpointing that the firm’s stock is undervalued.

“Another key important factor is that Total Energies is a dividend-paying company that implies a steady flow of income to investors and currently offers a dividend yield of 9.43 per cent.

“Adopting the earnings multiple techniques, we recommend a buy on the sticker.”

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Energy

Chevron Nigeria raises alarm on false recruitment information

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Chevron Nigeria Limited has raised an alarm on a false recruitment being conducted.

The operator of the Nigerian National Petroleum Company Limited (NNPC) and CNL Joint Venture dismissed the recruitment noting that is false.

In a statement by Mr Brikinn, General Manager, Policy, Government & Public Affairs, the organisation wrote, “We are aware of the circulation of false recruitment information in some media and online channels in the name of CNL and Chevron Corporation, purportedly advertising job positions in CNL. Additionally, fraudulent job offers have reportedly been sent through emails, text messages and phone calls by individuals purporting to be staff or representatives of CNL and Chevron Corporation.

“Members of the public are hereby notified that CNL does not solicit job applications or initiate recruitment processes through emails, posters, handbills, text messages, social media, or phone calls.

“Job seekers are advised to always check the company’s website at: http:/www.careers.chevron.com, and the national newspapers for job advertisements from CNL.

“CNL does not and will not require applicants to make any payment towards processing any job application. Job offers requesting candidates to pay money, at any point during the recruitment process, are not from CNL. CNL advises that anyone who receives these fraudulent communications should report them to the appropriate law enforcement agencies.

“CNL hereby dissociates itself from all false job adverts and offers published in any online media platform, web site, email, poster, handbill or any other medium.

“CNL will not respond to enquiries about fraudulent advertisements and job offers,” the statement read.

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NCDMB lauds SNEPCO, Bayelsa Govt over digital library inauguration at Niger Delta University

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The Executive Secretary, Nigerian Content Development and Monitoring Board (NCDMB), Engr. Felix Omatsola Ogbe has commended Shell Nigeria Exploration and Production Company (SNEPCo) and the Bayelsa State Government for the completion and inauguration of a Learning Centre and Digital Library at Niger Delta University (NDU), Amassoma, Bayelsa State.

The state-of-the-art facility which boasts three floors – a 2,300-seater Library Building – and a fully equipped digital library, also has a Wi-Fi Lounge, offices, digital educational technology rooms, a 500KVA generator housed within a purpose-built external structure, 500KVA transformer, a dedicated water facility and overhead tank, a restaurant/recreation hub, etc.

Engr. Ogbe, represented by the Director of Corporate Services of NCDMB, Dr. Ama Ikuru, prefaced his address at the commission ceremony on Thursday with a word of appreciation to the State Government for making the environment conducive for business activities.

Continuing, he noted, “Those of us in the oil and gas industry know that without the enabling environment, there will be no projects and without projects, there will be no local content growth and no projects like this one.” The project, as he noted, is part of SNEPCo’s “commitment to the Nigerian Content Human Capital Development Initiative.”

Regarding the sponsor of the project, the NCDMB boss stated, “I will thank Shell Nigeria Exploration and Production Company Limited (SNEPCO) and by extension, Shell Companies in Nigeria for showing faith, commitment, and good execution in the delivery of this project.”

The company’s major partner, Nigeria Upstream Investment Limited was similarly commended “for approving the execution of this project.”

Engr. Ogbe pointed out that “SNEPCO was not compelled by legislation, nor the force of regulators, nor by community agitation. They saw the need to support education in Nigeria and worked with their partners to conceptualize and commence the execution of this project.”

The role of NCDMB in facilitating the project execution was also highlighted. According to the Executive Secretary, “When funding for completion of the project became an issue, they sought permission from the NCDMB to complete the project.”

According to him, the request was promptly granted, with assurance of “our total support.”

On the importance of the facility to the University, Engr. Ogbe noted that “NDU is ready to soar above her peers in a digitalization and artificial intelligence-dominated academic world. With this facility,” he explained, “research projects will be completed on time, new findings will be published, students will graduate on time and lecturers will have the best materials for their publication and receive their elevation.”

He declared, “We are immensely proud of this achievement,” adding, “Shell Companies in delivering this project have proven beyond doubt that they are truly partners for Nigeria’s development.”

The Managing Director, SNEPCO, Mrs. Elohor Aiboni, said the learning complex embodies the commitment of her company to improving access to education for all Nigerians, and that the achievement is “the culmination of a vision shared by Nigerian National Petroleum Company Limited (NNPCL), SNEPCo, our co-venture partners, the Nigerian Content Development and Monitoring Board, and, of course, the Niger Delta University.”

On the wider benefits of the project to the local community and others, she noted, “Sustainable development is at the core of our mission. The construction process incorporated knowledge transfer programmes, empowering 24 individuals from the Niger Delta University with hands-on experience in complex engineering through industrial training opportunities. This initiative equips them with a solid foundation for successful future careers.”

The Managing Director, Shell Petroleum Development Company of Nigeria Limited, and Country Chair, Shell Companies in Nigeria, Mr. Osagie Okunbor, reminded the audience, which included the Bayelsa State Governor, Senator Douye Diri, represented by the Deputy Governor, Dr. Lawrence Ewhrudjakpo, and the Secretary to the State Government, Professor Nimibofa Ayawei, among others, that “The history of Shell [in Nigeria] began in Bayelsa State.”

He described the Learning Centre and Digital Library as “a signature project in the Niger Delta,” and thanked industry colleagues “for the fruitful collaboration.” He also assured that Shell Companies in Nigeria “will continue to maintain close partnership with Bayelsa State.”

In his own remarks, the Deputy Governor, Dr. Ewhrudjakpo, thanked “all who initiated and completed the facility,” while urging Shell and other oil and gas industry players to never be tired of partnering the Bayelsa State Government. While advising the university community to “put [the facility] to the best use,” he declared, “For the students, the time to give excuses for your failure is over. For the lecturers, the time to give excuses for your inability to research has also expired.”

Construction of the Learning Centre and Digital Library was initiated by SNEPCo in 2007 to enhance educational infrastructure in the country.

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Ibiyemi honoured with Posthumous award for contributions to energy sector

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The Founding Publisher of Nigerian NewsDirect, Late Dr Samuel Ibiyemi has been honoured with a Posthumous award for his contributions to the Energy sector at the maiden edition of the Energy Times award ceremony in Lagos.

The late Dr Samuel Ibiyemi was bestowed with the award of “Most Versatile Journalist of the year.”

Dr Ibiyemi before he passed on last year July was a member of the Nigerian Gas Association, Nigerian Guild of Editors, NIPR, Rotary Club, Newspapers Propietors Association of Nigeria (NPAN), Association of Energy Correspondents of Nigeria (NAEC), member Ife Development board, Board Chairman, Olode Grammar School, amongst a host of others. He was also notably a member of the technical drafting committee that drafted the Petroleum Industry Bill now Petroleum Industry Act (PIA), being the only Journalist on the committee.

Described by the former Executive Secretary of the Nigerian Content Development and Monitoring Board (NCDMB) as a champion of local content, Dr Ibiyemi utilised his platform to advocate for the development of Nigeria’s local content and created foras to adumbrate on policies that will change the trajectory of Nigeria’s Oil and gas industry.

Commending Dr Ibiyemi, Dr Diran Fawibe, the Chairman of International Energy Services Limited (IESL) and Chairman of the occasion described the Late Dr Ibiyemi as one of the few journalists who were really knowledgeable about the sector and actively pursued the growth of the sector through his tabloid, NewsDirect.

Fawibe noted that he used to buy NewsDirect everyday due to the rich quality content and reportage it supplied on a daily basis on the energy sector.

Receiving the award on behalf of the family, the Publisher/Executive Director of Nigerian NewsDirect, Mr Mathew Ibiyemi commended the management of Energy Times for recognizing the impacts Dr Ibiyemi made on the energy sector in Nigeria.

Mr Mathew Ibiyemi noted that the award was emotional for him explaining that though his late dad was no longer with the family presently, his impacts continue to make him remembered globally.

Similarly, the Deputy Managing Director of Falcon Corporation, Mrs Audrey Ozigbo in an emotional moment who also bagged an award of Amazon of Gas development dedicated her award to the Late Dr Ibiyemi and two of his colleagues who stood by her company at the early stages of her company’s growth.

The hall was filled with many industry stakeholders who were also eager to share their encounters and the impact the Late Dr Samuel Ibiyemi had on their lives and businesses.

Other recipients awarded at the award ceremony include the GCEO of the Nigerian National Petroleum Company Limited, Mr Mele Kolo Kyari, recognized at the award ceremony, Governor of Edo State, Mr Godwin Obaseki, Heirs Energies, Commission Chief Executive of Nigeria Upstream Regulatory Commission (NUPRC), Mr Gbenga Komolafe, United Bank for Africa, Niger Delta Power Holding Company, amongst a host of others.

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